Ten years ago, it all seemed so clear: A California medical research institute would recreate its success in Florida using $350 million in taxpayer-funded incentives.
A key metric to the start-up support: creating 303 jobs.
With the state, Orange County and Orlando governments offering generous financing and a long-term time horizon to meet modest performance goals, what could go wrong?
Turns out quite a bit, at least for taxpayers.
Over the course of a decade, the Sanford Burnham Prebys Medical Discovery Institute got its promised benefits, but it hasn’t upheld its end of the deal. Now, the Orlando project is out of money, its Plan-B collapsed this week, and the state’s incoming anti-incentive House Speaker is looking for payback.
“Right now I have our legal and our legislative staffs looking at any possible remedy under the existing contract,” Richard Corcoran, R- Land O’Lakes, told the Orlando Sentinel on Wednesday.
“My hope is that we find a way for these companies to understand that we will zealously protect taxpayer dollars and we will zealously go after those who abuse those funds,” he said.
In 2006, under Republican Gov. Jeb Bush, the state inked an incentive deal in which it would provide $155 million to help launch the bio-tech nonprofit’s East Coast offshoot. Local government incentives combined to make up the rest of the $350 million package.
The deal followed a $500 million incentive arrangement with Scripps Research Institute, another California medical group that tried to build a successful Florida branch. The effort was supposed to ignite a bio-tech boom, but today both Florida satellites are struggling financially.
The Sanford Burnham plan was designed to deliver 10-years of funding for an $80 million campus and cover operational expenses such as research equipment and employee salaries. Afterwards, the organization would transition to relying on federal grants, private donations and proceeds from the institute’s work. Like its performance commitments, that portion of the plan hasn’t materialized.
Sanford Burnham blames its financial woes on a lack of federal research funding and philanthropic donations, as well as the Great Recession. Its initial financial projections proved erroneous as a result.
The state’s first payment occurred in 2007, at a cost of $45 million. An average of $12 million was paid each subsequent year, with just $1.5 million remaining as of May, according to the state Department of Economic Opportunity.
Records show that Sanford Burnham created only 240 jobs with the funding, at an average wage of $69,000 last year, and made just 77 percent of the required $61 million in capital investments.
June 30 was the state’s last anticipated performance review date. The expected rate of return for the project was $1.63 for every $1 invested. The actual rate of return is left blank on the state’s project summary.
On Wednesday, Sanford Burnham’s plan to hand over the failed Medical City project to the University of Florida, a publicly funded institution, was declared officially off-the-table, leaving the future of the taxpayer-funded facility in question.
The University of Florida is a potent player in government funding, receiving $451 million in federal research grants last year in addition to its annual state funding. Sanford Burnham’s back-up plan was to dump the facility and walk away.
In May, representatives from Sanford Burnham and the university planned a “transfer of assets without payment,” according to a draft press release obtained by the Orlando Sentinel. Bernie Machen, a former University of Florida president and paid university adviser, was helping facilitate the transfer. Machen is also chairman of the board for Sanford Burnham.
The two parties came to an agreement without involving Gov. Rick Scott or the state legislature, both major stakeholders. Upon learning of the planned arrangement, Scott, a Republican, promptly inquired as to how the transfer would benefit taxpayers.
Presumably, it wouldn’t. At least, not to the liking of the 2016 state government.
“It is unclear how UF can help in a timely manner, given the likely need for legislative approval. As such, UF is unable to proceed at this time,” university officials said this week.
Death by good intentions
Needing legislative approval couldn’t come at a worse time for the financially dependent project.
Scott, an active proponent of using tax breaks to promote economic development, was unable to replenish the state’s incentive coffers earlier this year when fiscal hawks within his own political party refused to fund his $250 million proposal.
Corcoran was instrumental in that effort, and has since vowed to fight any future attempts to fund “corporate welfare” projects that place undue risks on taxpayers.
Judging by the lawmaker’s Twitter feed, the Sanford Burnham debacle could well be Exhibit-A in the 2017 legislative session for why he opposes taxpayer funded incentive deals with private business and organizations.
“One of the greatest mistakes is to judge policies and programs by their intentions rather than their results,” he retweeted Thursday.
Corcoran also has received a show support by Florida TaxWatch, a nonpartisan government watchdog.
“We appreciate and support House Speaker-Designate Richard Corcoran’s efforts to recover taxpayer money provided to Sanford Burnham,” TaxWatch said in a statement.
In a recent interview with the San Diego Union Tribune, Kristiina Vuori, president of the La Jolla-based medical institute, said that the lure of Florida’s incentives was too good to pass up at the time.
“I think we appraised the unique opportunity that was afforded by the state of Florida [and chose] to expand both our geographic footprint and our mission,” she said. “When the Florida opportunity came to our attention, we were really bursting at the seams here.”